Health Care Planning: What You Need in Retirement

by Sequoia Financial Group
by Sequoia Financial Group

Like in years past, health care continues to be one of the largest expenses in retirement (after housing and transportation). However, where previous generations had access to employer or union-sponsored retirement health benefits, you may not, and your budgeting needs to account for that.

The rising cost of health care poses a unique challenge for retirees in achieving or maintaining financial independence. To assist in your retirement planning, we’ve compiled a breakdown of what Medicare offers and how much you should target to save for healthcare costs in retirement.

What is Medicare?

Medicare provides health insurance for individuals age 65 or older, and the coverage varies depending on the “parts” purchased. There are four different parts of Medicare, which can be obtained through either Original Medicare (run by Medicare) or a Medicare Advantage Plan (run by private insurance companies):

  • Part A (Hospital Insurance): Helps cover inpatient care in hospitals (semi-private room and general nursing care – Part B is needed for doctor services), skilled nursing facilities (after a 3-day hospital stay – excluding long-term care), and home health care (limited to medically-necessary part-time care). If Medicare taxes were paid while working, this coverage is typically free.
  • Part B (Medical Insurance): Helps cover preventative services, doctor’s services, hospital outpatient care, and home health care. This coverage is automatically provided if you receive Social Security and starts the first day of the month you turn 65. Monthly premiums are deducted from your Social Security benefit and cost more if your adjusted gross income is above a certain amount. The cost for services varies depending on the coverage provider; there is typically an annual deductible that needs to be met first, with 20% of the Medicare-approved service amount paid by you thereafter.
  • Part C (Medicare Advantage Plans): Health plans similar to HMOs (Health Maintenance Organizations) or PPOs (Preferred Provider Organizations) are maintained by private health insurance companies that Medicare has approved. These plans are considered to be “Part C” and include the services of Part A and Part B, are in addition to your Part B premium, and typically provide Part D coverage (below), which may be an additional cost. These plans must provide all the services of Part A and B (except hospice care) and may include additional coverage for dental, hearing, vision, and health and wellness programs. Medicare pays private insurance companies a fixed monthly amount for your care, and they must follow Medicare’s rules. Each Part C plan can charge different out-of-pocket amounts and has different rules for obtaining services, such as a doctor’s referral.
  • Part D (Medicare Prescription Drug Coverage): Helps cover prescription drugs and may possibly lower costs and protect against future increases. Prescription drug coverage is optional and is run by private health insurance companies approved by Medicare. Depending on your Medicare provider, you may be required to have both Part A and B coverage before you can obtain Part D.
  • Medigap is supplemental coverage that will fill “gaps” in Original Medicare coverage and is provided by private insurance companies and some employers and unions. Individuals with Part C Medicare do not need Medigap coverage, and it cannot be sold to you.

Medicare Coverage Options


A Look at The Numbers: What to Save

A 2023 study by Fidelity Consulting Services[1] predicts that a 65-year-old couple retiring today without
employer-sponsored retiree health care will need $315,000 to cover their health care costs for the rest of
their lives. This estimate assumes the couple has no employer-provided retiree healthcare coverage but
does qualify for Medicare. It does not include expenses for over-the-counter medications, dental services, or
long-term care.

The 2023 estimate is flat from 2022 ($157,500 for a single retiree, or $315,000 for a couple), and has nearly doubled from the $80,000 for a single retiree estimated in 2002.[2]

Fidelity estimates someone age 65 should incur a minimum of approximately $550 monthly
medical expenses. The estimate is determined as follows.
Capture 2.PNGThese figures do not include dental, vision, or hearing costs. Based on a combination of quotes from various retiree healthcare insurance providers, we estimate the following costs:

Capture 3.PNG
Combining these two estimates, we assume the average healthcare spending for a 65-year-old is
approximately $785 per month per person.

The complexities of retirement planning, especially when costs seem to be continually on the rise, can be anxiety-inducing. If you’d like more information regarding health insurance coverage options, contact us , and we’ll put you in touch with a professional specializing in retirement and healthcare planning.




Disclosure: This material is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Diversification cannot assure profit or guarantee against loss. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Sequoia Financial Advisors, LLC makes no representations or warranties with respect to the accuracy, reliability, or utility of information obtained from third-parties. Certain assumptions may have been made by these sources in compiling such information, and changes to assumptions may have material impact on the information presented in these materials. Sequoia Financial Advisors, LLC does not provide tax or legal advice. Information about Sequoia can be found within Part 2A of the firm’s Form ADV, which is available at

The views expressed represent the opinion of Sequoia Financial Group. The views are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Stated information is derived from proprietary and nonproprietary sources that have not been independently verified for accuracy or completeness. While Sequoia believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and Sequoia’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties. Actual results, performance or events may differ materially from those expressed or implied in such statements. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. Past performance is not an indication of future results. Investment advisory services offered through Sequoia Financial Advisors, LLC, an SEC Registered Investment Advisor. Registration as an investment advisor does not imply a certain level of skill or training.